Nasdaq, S&P index hit record highs

WALL STREET

NEW YORK -- With computer and software shares leading the way, broad measures of the stock market rose to all-time highs yesterday as record-low long-term interest rates boosted prices.

"The bond market is really giving direction to the stock market," said Ronald Doran, head of institutional trading at C. L. King & Associates.

While the Dow Jones industrial average rose 7.26 to 3,651.25, just shy of its record close of 3,652.09 last Wednesday, both the Standard & Poor's 500 Index and the Nasdaq Combined Composite Index broke records set Monday.

The S&P 500 climbed 1.66 to 463.56, and the Nasdaq Composite soared 5.46 to 742.84. Microsoft Corp. and Oracle Systems Corp. led the rise in the Nasdaq index.

The American Stock Exchange Market Value Index, the New York Stock Exchange Composite Index, and the Dow Jones utilities average also surpassed Monday's all-time highs. The Amex index jumped 2.33 to 458.60, the NYSE Composite gained 0.84 to 256.88, and the utilities average added 1.25 to 256.46.

Yesterday's economic reports reinforced the perception that the recovery remained modest at best, which would keep interest rates low for some time, traders and money managers said. Low rates help make the returns on stocks more enticing than those of bank deposits and other fixed-rate investments.

"When growth is an unusual commodity because of the weak economy, the valuations of growth stocks should improve," said Lary Aasheim, a money manager and analyst at CoreStates Investment Advisers, which manages about $22 billion.

"Growth is a scarce commodity, and when anything's scarce, the price goes up," Mr. Aasheim said.

Microsoft leapt $2.50 to $75.125. An analyst at Goldman, Sachs & Co. said the company's next-generation operating system for desktop computers, dubbed Chicago, had received favorable reviews in industry publications.

Oracle, up $1.125 at $51.50, continued to rebound from a selloff last week that was triggered by Montgomery Securities' negative comments about pricing trends in the database software market.

Advancers led decliners by a margin of 8 to 7 among common stocks on the New York Stock Exchange. Trading accelerated from Monday, with 252.8 million shares changing hands on the Big Board.

Stocks were mixed most of the session, as reports on economic growth and consumer confidence failed to boost the market although they were better than expected.

The Commerce Department said the economy grew at a 1.8 percent annual pace in the second quarter, above an earlier estimate of 1.6 percent and exceeding expectations.

Meanwhile, the Conference Board said consumer confidence fell 59 in August from a revised 59.2 in July, originally reported as 57.7. Economists had expected a drop to 57.

Treasury bonds jumped around in the wake of the reports. The yield on the 30-year bond dropped to a record low of 6.08 percent after the Federal Reserve Bank of New York said it was buying notes and bonds.

"Corporate profits are higher and interest rates are significantly lower than they were at the beginning of the year," said money manager Ron Baron, president of Baron Capital Corp. "As long as we're able to find stocks that we think can make 50 percent over two years, we invest."

Cisco tumbled $2, to $47.75, following a lower rating from a Hancock Institutional Equity Services analyst amid concern about growing competition in the computer networking area.

Limited eased 25 cents, to $23.375, in the wake of a restructuring announced late Monday.

International Business Machines rallied $1.125, to $45.75. More than 50 computer manufacturers are expected to announce today a standard for the Unix operating system, enabling companies to compete better with Microsoft's NT system.